The Machine That Drives the Auction World

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David Hockney’s “Portrait of an Artist (Pool with Two Figures)” was offered without a minimum reserve price. It sold for $90.3 million, an auction record for a work by living artist.CreditCreditvia Christie's

By Scott Reyburn

Nov. 23, 2018

The multimillion-dollar churn of top-end art auctions sometimes seems as predictable as a washing machine: Each load has its differences, but they can be difficult to discern when the cycle remains the same.

Last week in New York, Christie’s, Sotheby’s and Phillips made a combined $2.1 billion from their twice-yearly auctions of Impressionist, modern and contemporary art. The total was higher than the $1.9 billion achieved at equivalent sales in May, though down from the $2.3 billion made last November, when Leonardo’s “Salvator Mundi” sold for$450.3 million.

For these marquee New York sales, $2 billion seems to have become the figure that reassures a wider world that top end of the art market is humming, if not actually booming.

Last week, that feel-good figure was achieved with the help of material not normally seen in Impressionist, modern and contemporary sales. Prices were also propped up, wherever possible, with hundreds of millions of dollars in financial guarantees.

“It’s all about writing the biggest check. The auction houses are desperate to keep the machine going,” said Wendy Goldsmith, an art adviser who attended the New York sales. “I couldn’t believe the market could absorb that much volume.”

Christie’s captured the biggest market share, mounting nine separate sales, including an unusual Sunday-night auction of Impressionist and modern art and a stand-alone sale of Alberto and Diego Giacometti furniture. Over all, it offered 1,007 lots — an increase of more than 9 percent from the previous November — and raised $1.1 billion.

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Edward Hopper’s “Chop Suey” was the jewel of Barney A. Ebsworth’s collection of American art. Backed by a third-party guarantor, it sold for $91.9 million.Creditvia Christie's

American art is normally billed as a localized auction category, but Christie’s gave the renowned collection of 20th-century works acquired by the Seattle travel entrepreneur Barney A. Ebsworth international exposure with a 42-lot evening sale, followed by a day auction. All the works were guaranteed by either Christie’s or a third party, resulting in a total of $323 million. The prize of the collection was Edward Hopper’s “Chop Suey,” a 1929 painting of two women in a Chinese restaurant that was bought by its third-party guarantor for $91.9 million, more than double the artist’s previous auction high.

Like Hopper, the modernist painter Marsden Hartley is an artist usually offered in American art sales. But Sotheby’s opted to bolster its Impressionist and modern auction with “Pre-War Pageant,” one of some 30 abstract paintings that Hartley made in Berlin from 1913 to 1915.

The owners, the New York collectors Ed and Deborah Shein, were able to negotiate a guarantee check of about $30 million from Sotheby’s. The auction house was left owning the painting after bidding failed to reach $25 million.

“The estimate was maybe slightly aggressive,” Michael Altman, a New York dealer who specializes in American art, said, adding that other works by Hartley had recently sold privately for more than $20 million.

This approach given a new twist at Christie’s on Thursday, when David Hockney’s celebrated 1972 painting “Portrait of an Artist (Pool with Two Figures),” was offered without a guarantee or a reserve. Valued by Christie’s at $80 million, it could, theoretically, have sold for $1.

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Auction prices for monochrome paintings by the Japanese artist Tomoo Gokita reached a new level when the 2015 work “Club Mature” sold for $807,000.Creditvia Phillips

The widely exhibited painting, showing the British artist’s former lover gazing at a submerged swimmer, was owned by Joe Lewis, a British billionaire based in the Bahamas. Mr. Lewis rejected at least two “very strong” offers from would-be guarantors, according to Loïc Gouzer, co-chairman of postwar and contemporary art at Christie’s.

The painting sold to a telephone bidder for $90.3 million with fees, shattering the auction record for a living artist.

“The strategy was genius,” said Offer Waterman, a dealer based in London who regularly sells works by Mr. Hockney. “The big buyers were encouraged to pay what they wanted to pay.”

Mr. Waterman added that by offering the painting without reserve, Mr. Lewis had shown he was confident that there would be demand — and that he would not be sharing any profit with a third party. Christie’s would have gained market share, but little if any profit from the transaction, according to Mr. Waterman.

The London-based analysts ArtTactic said this week that the overall value of guarantees for evening sales at Christie’s, Sotheby’s and Phillips increased 42 percent from last November, to $537 million, based on low estimates. Guaranteed lots, financed by the auction houses or third parties, accounted for about 60 percent of overall final sales.

Evan Beard, a national art services executive at U.S. Trust, a wealth management unit of Bank of America, said that it had become routine for his clients to guarantee several lots in a season. Guarantors can be rewarded when they buy — $4 million in the case of the Hopper at Christie’s — or enjoy a percentage of the “overage” above the guarantee if they are outbid.

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Works by nonwhite and female artists are driving growth in the art market. Among them is Jack Whitten, whose 1985 abstract “Ancient Mentor I” sold for $2.2 million.Creditvia Sotheby's

“They’re going to be a more common tool — it’s the market becoming more efficient,” he said. If you were going to buy a picture, he added, why not get a discount, or some of the overage?

New York’s auction machine is certainly functioning efficiently, particularly for contemporary art, which generated more than half the week’s $2.1 billion total.

At Phillips on Thursday, the day sale — the lower-priced sector where the auction houses make their most consistent profits — raised $25.5 million, with 82 percent of its 284 lots successful. Prices for monochrome paintings by the Japanese artist Tomoo Gokita reached new level when the 2015 canvas “Club Mature,” showing a quartet of models with blanked-out faces, sold for $807,000.

Underappreciated names, particularly nonwhite and female artists, are driving growth in the market. The Wednesday-evening contemporary sale at Sotheby’s was judiciously on trend, including works such as Jack Whitten’s 1985 abstract “Ancient Mentor I,” which sold for $2.2 million, double the low estimate and a new high for the artist.

Some established market darlings — the sort of artists who tend to attract third-party guarantees — were proving a harder sell. Two large-scale monochrome abstracts by Christopher Wool, works which have previously been steady sellers at auctions and fairs, were unsold at Christie’s and Phillips. Both had been estimated at about $4 million.

“The market is very picky,” Todd Levin, an art adviser based in New York, said, adding that more individuals from the finance world seemed to be looking to profit from third-party guarantees.

“They think that art is a business easy to game,” Mr. Levin said. “It’s become the last stop in Vegas before getting on a plane. But the odds are still with the house.”